Finland’s economy is expected to grow by 2.0 per cent in both 2026 and 2027, according to a new forecast from OP Pohjola’s economists.
The bank has kept its GDP growth forecast unchanged, but says the composition of growth has shifted. Exports and investment now look stronger than previously expected, while the outlook for household consumption has weakened slightly and imports are forecast to grow faster.
Finland’s economy expanded by 1.4 per cent year-on-year in the second quarter. Based on recent indicators, OP estimates that growth accelerated to more than two per cent during the third quarter.
“The economy has produced both good and bad news since the summer. Oil has become more expensive and interest rates have risen. Even so, economic growth has strengthened, business-cycle indicators are strong and new investment projects support the outlook for the coming year,” OP Pohjola chief economist Reijo Heiskanen said in a statement.
Exports have already been growing at a solid pace for several years.
OP expects them to be supported by favourable international demand and Finland’s strong cost competitiveness. As a result, exports as a share of GDP are forecast to rise by 2028 to their highest level in 50 years.
Investment is also increasing strongly, partly because of public-sector procurement and data centre projects. Other investment is recovering as well, although residential construction is expected to remain relatively weak.
Overall, investment as a share of GDP is projected to rise in the coming years to its highest level in more than three decades.
Heiskanen notes, however, that much of this investment relies heavily on imported goods.
“Because investment is strongly import-intensive, it does not translate into economic growth to the same extent, and the current account will return to deficit,” he said.
“At the same time, the investments increase Finland’s production potential and strengthen the conditions for long-term growth, so a temporary deficit is mainly a positive development.”
Household spending and employment begin to recover
Private consumption has also started to improve and is expected to play a larger role in supporting growth in 2027.
This year, consumption is being supported mainly by a decline in the household saving rate. Next year, rising real incomes are expected to become more important.
OP nevertheless expects households to continue saving at a relatively high rate, partly because interest rates remain elevated.
Inflation is forecast to ease as energy prices fall in line with market expectations. Underlying inflation in Finland has remained low, while consumer prices have risen more slowly than the euro-area average.
The labour market is also beginning to recover gradually.
Employment is forecast to grow at a good pace in 2027, while unemployment begins to decline. OP nevertheless expects the unemployment rate to remain relatively high, partly because more people are participating in the labour market.
Energy remains a key risk
Growth in the euro area is expected to continue at a steady pace, with recovering industrial activity and export demand offsetting the effects of higher interest rates and energy prices.
According to OP, the rise in energy prices caused by the Middle East crisis has not yet spread significantly into other prices.
Current inflation dynamics therefore do not, in OP’s assessment, create much need for substantial monetary tightening. Longer Euribor rates could even decline from current levels.
A renewed escalation of the crisis would change that outlook, however. OP warns that it could increase the risk of tighter monetary policy and higher interest rates.